Update Covid-19 Measures
Introduction
We trust you are settling down into the post-covid-19 lockdown working environment. We are finding through our work with clients that the future is still quite uncertain and very difficult to predict. Many businesses returned to a reasonable level of activity but as that initial burst diminishes and the first wage subsidy period comes to an end, businesses will be finding that working capital is becoming very tight. In many cases banks have responded quickly to clients cash flow needs by putting in place temporary overdraft extensions and placing loans on interest only terms, however many of these arrangements were for six months meaning that they will be expiring towards the end of September.
We encourage you to project your cash flow needs weekly, monthly and annually to plan for your businesses working capital needs and it is also useful to be able to model out the impact of different scenarios. In many cases banks require cash flow projections before committing to any new lending. IRD are also likely to request a cash flow report if you are looking to pay your tax under an arrangement with them. If you do have temporary arrangements in place with your bank, we recommend that you start the process now to determine what a more permanent funding solution might look like. We can help you prepare budgets and cash flow reports, just give us a call and we can discuss options.
We are determined to help all our clients survive through this difficult economic period. If there is anything we can help with or if you would just like someone to throw ideas around with, please do not hesitate to contact us.
Below we give you an update on some specific Covid-19 developments.
Wage Subsidy Extension
The government have announced a second round of wage subsidy for businesses severely impacted by Covid-19. The first link below provides you with all the detail you need to know and access to the application form. The second link takes you to a tool to help you determine if you are eligible or not. If you think you might qualify or would like us to review your recent financial performance to see if you qualify, please give us a call. Applications can be made up until 1 September.
https://www.workandincome.govt.nz/covid-19/wage-subsidy-extension/
https://www.business.govt.nz/covid-19/wage-subsidy-eligibility-tool?
IRD Small Business Loans
The link below takes you to information regarding the small business loan scheme administered by Inland Revenue. You apply for the loan through MyIR and applications can be made up to and including 24 July. If you are not sure whether or not the loan is the right option for your business, give us a call to discuss.
https://www.ird.govt.nz/covid-19/business-and-organisations/small-business-cash-flow-loan
Low Asset Value Tax Deduction
Up until recently, when a business purchases a fixed asset such as a vehicle, plant, equipment, computers or furniture with a value of $500 or more (excluding GST), the asset is ‘capitalised’ and depreciated over the useful life of the asset. This means that rather than getting a tax deduction for the entire cost of the asset in the year that you purchased it, the cost is claimed over a number of years. As a measure to provide income tax relief the $500 threshold has been increased to $5,000 for the year 17 March 2020 – 17 March 2021. This means that if you purchase assets costing less than $5,000 (GST Exclusive) you can claim the entire amount as an expenses in the year the asset was purchased. If your business is in need of such low value fixed assets we recommend that you look to make such purchases before 17 March 2021. After 17 March 2021 the threshold will decrease to $1,000.
ACC Invoices
Ordinarily ACC would be issuing their 2020/2021 invoices in July. As a measure to assist business cash flow they will delay invoicing until October at which time they will advise of the payment options available. We note that this does not include CoverPlus Extra invoices, these invoices would ordinarily have been issued 1 April but have been delayed until 1 July.
During lockdown ACC offered customers the opportunity to put their payments on hold. We understand that ACC collection officers will be in touch with these customers in the near future to ascertain their ability to make payment and agree an arrangement for payment. ACC have suggested that if you are one of these customers or you are struggling to pay any outstanding levies, that you make contact with them at 0800 729 538 or email collections@acc.co.nz
Conclusion
There are a range of other measures, schemes and tax changes relating to Covid-19 many of which will impact specific clients, we will contact you directly if we are aware of an issue or opportunity specific to your business or industry. In the meantime, please don’t forget we are here to help so don’t hesitate to contact us.
Kind Regards
Chris, Greg and the Team at SHP